Systems and methods for index-based pricing in a price management system

ABSTRACT

The present invention provides a flexible pricing method for providing pricing adjustments for a product in a deal in response to price variations in selected indexes. The method comprises: designating an index for the product wherein said index has a published index value; and computing a price for said product based on said published index value. The invention also provides for periodically re-pricing deals with index-based pricing terms.

CROSS REFERENCE TO RELATED APPLICATIONS

This application is a continuation of U.S. patent application Ser. No.11/194,070 filed on Jul. 30, 2005, by Sundaram et al., entitled “SYSTEMSAND METHODS FOR INDEX-BASED PRICING IN A PRICE MANAGEMENT SYSTEM”,recently allowed, which application is a continuation-in-part of U.S.patent application Ser. No. 10/914,716 filed on Aug. 9, 2004 by Lehrman,entitled “SYSTEMS AND METHODS FOR FORCASTING DATA IN AN INTEGRATED PRICEMANAGEMENT SYSTEM”, abandoned, which applications are incorporatedherein in their entirety by this reference.

This application is related to U.S. patent application Ser. No.11/193,314 filed on Jul. 30, 2005 by MUNIGANTI ET AL, entitled“INTEGRATED PRICE MANAGEMENT SYSTEMS WITH FUTURE-PRICING AND METHODSTHEREFOR”, patented, which application is incorporated herein in itsentirety by this reference.

This application is also related to U.S. patent application Ser. No.11/193,313 filed on Jul. 30, 2005 by ZHANG ET AL, entitled “SYSTEMS ANDMETHODS FOR TIERED PRICING IN A PRICE MANAGEMENT SYSTEM”, pending, whichapplication is incorporated herein in its entirety by this reference.

BACKGROUND OF THE INVENTION

The present invention relates to price management systems. Moreparticularly, the present invention relates to systems and methods forindex-based pricing in an integrated price management system.

Indexes, which are generally known in the art, have been employed in avariety of manners. Stock markets, for example, often use indexes as agauge of general market condition. Other indexes measure the movement innational and international prices for commodities and other items oftrade. For instance, in the chemical industry, well known periodicindexes are used to establish the index price of various bulk chemicals.Said indexes may be published on a daily, weekly, monthly, quarterly orannual basis.

Given the potential volatility in the future price of a particularcommodity, it is often to the advantage of both buyer and seller to tiethe price of a particular product to an agreed upon index or indexes.The customer's choice of indexes will vary depending upon industrysegment for which they buy, the region where they are located, as wellas the major commodity categories they buy in volume quantities.Customers must focus upon commodity-specific questions pertaining toproduct delivery speeds (leadtimes) and price trend expectations.

Index prices do not necessarily represent levels at which transactionshave actually occurred. They are designed to show monthly spot marketpurchase order averages and are intended primarily to indicatemonth-to-month trends. Specific prices any buyer pays will vary widelydepending on volume, market factors, distribution issues, specificationvariances, surcharges, packaging fees and other factors

Businesses employ a myriad of enterprise resource planning tools inorder to manage and control business processes. For example, systemslike SAP are employed to facilitate management by using objective datain order gain enterprise efficiencies. By manipulating objective data,these systems offer consistent metrics upon which business may makeinformed decisions and policies regarding the viability and direction oftheir products and services. However, in many cases, the decisions andpolicies may be difficult to procure as a result of the volume andorganization of relevant data and may be difficult to administer as bothtemporal restraints and approval processes may inhibit rapid deploymentof valuable information.

In particular, in the context of incorporating an index-based pricingand re-pricing policy into an integrated price management system withinthe context of said enterprise resource planning system, informationregarding pricing terms tied to indexes throughout the system may bedifficult to obtain. The pricing system, however, must be equipped toperform accurate re-pricing functions in response to changing indexes indeals having index-based pricing terms.

It is often the case that a sales force may need to modify the impact ofa published index upon the agreed upon pricing structure. Variousfactors and operators may advantageously be incorporated into a formulawhich uses the index to calculate an index-based price in accordancewith business realities. The process can be complicated and cumbersomeand, as such not conducive to efficient deal negotiation.

As such, methods for generating index-based pricing formulas in a timelymanner, as well as systems and methods for incorporating index-basedpricing terms into deals in a manner guaranteeing their effectivenessmay be desirable to achieve system-wide price management efficiency.

In view of the foregoing, Systems and Methods for Index-Based Pricing ina Price Management System are disclosed.

SUMMARY OF THE INVENTION

The method of the invention provides a flexible pricing method forproviding pricing adjustments for a product in a deal in response toprice variations in selected indexes. The method comprises: designatingan index for the product wherein said index has a published index value;and computing a price for said product based on said published indexvalue.

In other embodiments, the method includes setting an index position;setting a reference period for said index; and generating a formula forcomputing said price as a function of said index value for saidreference period. The present invention also contemplates incorporatingsaid formula as pricing logic into a deal including said product;monitoring said index; detecting a change in said index value giving anew index value; and computing a new price for said product as afunction of said new index value for selected commitment periods.

In still another embodiment, the method contemplates re-pricing alldeals including said product using said new price; and generating newprice records for each commitment period of each said deal.

In another embodiment, the invention provides a flexible pricing methodfor providing pricing adjustments in response to price variations inselected indexes, wherein the method selects at least one productcomprising more than one component; designates at least one index for atleast one of said components, wherein said at least one index has apublished index value; and computes a price for said product based onsaid published index value.

In said embodiment, the method generates a formula for calculating saidprice as a function of said at least one index and incorporates saidformula as pricing logic into a deal including said product. The methodcontemplates monitoring said at least one index; detecting a change insaid at least one index value giving at least one new index value; andcomputing a new price for said product as a function of said at leastone new index value. The method also contemplates re-pricing all dealsincluding said product using said new price and generating new pricerecords for each commitment period of each said deal.

In yet another embodiment, the invention provides a method forprotecting a price of at least one product having a designated index byperforming the steps of: selecting a deal including said at least oneproduct having a designated index, wherein: said designated index has apublished index value, wherein: the price of said at least one productis computed based on said published index value; and designating a priceprotection period, wherein: said price remains unchanged for theduration of said price protection period.

Said embodiment further contemplates computing a new price for said atleast one product at the expiration of said price protection periodbased on said designated index, wherein: a value equal to the publishedindex value at the start of said price protection period is used forsaid computation; and maintaining said new price unchanged for theduration of said price protection period. Furthermore, the methodcontemplates computing a current price at the expiration of each priceprotection period; and maintaining said current price unchanged for theduration of each price protection period.

In the case where the product comprises more than one component, themethod contemplates designating at least one critical index for at leastone of said components; setting a threshold value for change in said atleast one critical index; and computing a new price of said productirrespective of said price protection period when said threshold valueis met or exceeded.

In another embodiment, the method provides a flexible pricing method forproviding temporary pricing adjustments for at least one product in atleast one deal in said price management system, comprising: selecting atleast one commitment period from said at least one deal with at leastone product; selecting a threshold value for said at least one product;and defining a discount factor for the price of said at least oneproduct, wherein: the price of said at least one product sold at orabove said threshold value during said at least one commitment period isdiscounted by said discount factor.

Said embodiment contemplates where said discount factor is expressed asa currency per unit of measure. It is also provided that said thresholdvalue and said discount factor for each said at least one commitmentperiod, are persisted in a pricing logic protocol of said deal.Furthermore, a discount price is computed by utilizing said pricinglogic protocol, and a discount adjustment value is computed anddisplayed for each said selected commitment period.

The method further comprises computing a total discount adjustment valueover each said selected commitment period, and displaying said totaldiscount adjustment value.

Note that the various features of the present invention described abovecan be practiced alone or in combination. These and other features ofthe present invention will be described in more detail below in thedetailed description of the invention and in conjunction with thefollowing figures.

BRIEF DESCRIPTION OF THE DRAWINGS

The present invention is illustrated by way of example, and not by wayof limitation, in the figures of the accompanying drawings and in whichlike reference numerals refer to similar elements and in which:

FIGS. 1 and 2 are simplified graphical representations of an enterprisepricing environment featuring tiered pricing, MFN pricing, and indexpricing; and user accessible entry points to each.

FIGS. 3 through 5 are simplified graphical representations of anenterprise pricing environment wherein tiered pricing logic, MFN logic,and index pricing logic are integrated into the price management system.

FIG. 6 is a simplified graphical representation of a path taken by auser in accessing pricing tier policy within the price managementsystem.

FIGS. 7 and 7A-7C are flowcharts illustrating a process for calculatingpricing tier-based terms in an embodiment of the invention.

FIGS. 8 through 13 are pricing tier related windows illustrating sampleuser interfaces in accordance with an embodiment of the invention.

FIGS. 14 and 14A are flowcharts illustrating a process for calculatingpotential MFN impact in accordance with an embodiment of the invention.

FIG. 15 is a simplified graphical representation of a path taken by auser in accessing MFN information within the price management system.

FIGS. 16 and 17 are flowcharts illustrating a process for calculatingMFN adjustment value and MFN impact in accordance with an embodiment ofthe invention.

FIGS. 18 and 19 are MFN related windows illustrating sample userinterfaces in accordance with an embodiment of the invention.

FIG. 20 is a simplified graphical representation of a path taken by auser when establishing index-based pricing terms within the pricemanagement system.

FIGS. 21 and 21A are flowcharts illustrating a process for making atemporary voluntary allowance in accordance with an embodiment of theinvention.

FIGS. 22 and 22A are flowcharts illustrating a process for calculating achemical index-based price in accordance with an embodiment of theinvention.

FIGS. 23 and 24 are index-based pricing related windows illustratingsample user interfaces in accordance with an embodiment of theinvention.

FIG. 25 is a flowchart illustrating a process for calculating anindex-based price with BOM in accordance with an embodiment of theinvention.

FIGS. 26 through 28 are BOM index-based pricing related windowsillustrating sample user interfaces in accordance with an embodiment ofthe invention.

FIG. 29 is a flowchart illustrating a process for performing chemicalindex-based periodic re-pricing in accordance with an embodiment of theinvention.

FIGS. 30 and 31 are index-based periodic re-pricing related windowsillustrating sample user interfaces in accordance with an embodiment ofthe invention.

FIG. 32 is a flowchart illustrating a process for applying priceprotection in accordance with an embodiment of the invention.

FIGS. 33 and 34 are price protection related windows illustrating sampleuser interfaces in accordance with an embodiment of the invention.

FIG. 35 is a flowchart illustrating a process for incorporating a rawmaterial escape clause in accordance with an embodiment of theinvention.

DETAILED DESCRIPTION OF THE PREFERRED EMBODIMENTS

The present invention will now be described in detail with reference toselected preferred embodiments thereof as illustrated in theaccompanying drawings. In the following description, numerous specificdetails are set forth in order to provide a thorough understanding ofthe present invention. It will be apparent, however, to one skilled inthe art, that the present invention may be practiced without some or allof these specific details. In other instances, well known process stepsand/or structures have not been described in detail in order to notunnecessarily obscure the present invention. The features and advantagesof the present invention may be better understood with reference to thedrawings and discussions that follow.

FIG. 1 is a simplified graphical representation of an enterpriseintegrated price management system featuring Tiered pricing, MFN pricingand Index-Based pricing in accordance with an implementation of anembodiment of the present invention. A historical database 110 maycontain any of a number of enterprise pricing environment relatedrecords. An analysis of said historical data may then be used togenerate a transaction and policy database 150. Analysts 170 may use thestored data to formulate policies which may be approved and institutedby an executive committee 190. Said executive committee may monitor datastored and modify policy generated in response to changes in enterprisebusiness objectives or external market conditions.

Policies generated by the executive committee 190 with feedback from theanalysts 170 may be accessed by a sales force 180 from the transactionand policy database 150 in the course of negotiating a salestransaction. In this manner, sales negotiations and transactions may beconducted in accordance with enterprise business objectives on a realtime basis. For example, analysis of a selected group of transactionsresiding in the historical database 110 may generate a policy thatrequires or suggests a volume discount for sales of a particular productabove a selected threshold. In this example, historical salestransactions may have indicated that a volume discount for a particularproduct tends to stimulate sufficient additional sales to justify thediscount. Thus, in this manner, a policy may both be generated andincorporated into the price management system. A policy may then be usedto generate logic that may be used by the sales force 180 in generatinga transaction item.

Policies may be derived from any combination of historical data, marketindicators, common business custom and practice, or other external data.The executive committee 190 may manually enter any number of policiesrelevant to a going concern. For example, an executive committee 190 mayuse historical sales data in combination with external forecast data toformulate pricing tier policy 120. Forecast data may comprise, in someexamples, forward looking price estimations for a product or productset, which may be stored in a transaction and policy database 150.Pricing tiers provide pricing adjustments for selected levels, or tiers,of product quantity or transaction currency amount in a given deal.Historical and forecast data may be utilized by an executive committee190 to analyze a given market to determine whether a margincorresponding to a deal may be preserved or enhanced by virtue ofimplementing pricing tier policy at the transaction level.

In the same manner, the executive committee 190 may use relevant data togenerate most favored nation (MFN) policy 130. In some embodiments, MFNpolicies may then be incorporated into the integrated price managementsystem of the present invention. MFN is a status accorded a product orset of products in a deal such that said product or set of products insaid deal for a defined time period will be guaranteed to be priced ator below the lowest price for said same product or set of products inany other valid deal in said integrated price management system over thesame time period. MFN allows a vendor to assure a customer that thenegotiated price is, and will remain for the agreed time period, thelowest price offered by the vendor to any customer. The Executivecommittee 190 may determine through analysis of historical and forecastdata that a margin corresponding to a deal may be preserved or enhancedby virtue of offering MFN status for a given product or product set.

Index-based pricing may be formulated into index pricing policy 140which may similarly be incorporated into some embodiments of the presentintegrated price management system. Indexes, which are generally knownin the art, have been employed in a variety of manners. Stock markets,for example, often use indexes as a gauge of general market condition.Other indexes measure the movement in national and international pricesfor commodities and other items of trade. For instance, in the chemicalindustry, well known periodic indexes are used to establish the indexprice of various bulk chemicals. Said indexes may be published on adaily, weekly, monthly, quarterly or annual basis. In a preferredembodiment of the present invention, product pricing is tied to selectedindexes within the context of the integrated price management system.

The executive committee 190 may manually enter any number of policiesinto the transaction and policy database 150 using historical data,forecast data, or other informed logical or best guess forecastinformation in accordance with the present invention. Said such data orinformation may also be used, in conjunction with input from analysts170, to monitor and update policies as necessary. The executivecommittee 190 may grant the sales force 180 any amount of flexibilitywith respect to adhering to policy. For instance, in the context ofsetting pricing tiers, the pricing tier policy 120 may be configuredsuch that, when accessed by the sales force 180, any number of pricingtier parameters may be set. On the other hand, the executive committeemay wish to limit the number of parameters which the sales force may setin accordance with business strategy and objectives.

After transactions are generated based on policies, a transactionalportion of the database may be used to generate sales quotes by a salesforce 180 in SAP 160 or other appropriate enterprise resource planningsystem used to maintain and control business processes in order to gainenterprise efficiencies. SAP 160 may then generate a sales invoice whichmay then, in turn, be used to further populate a historical database110.

FIG. 2 is a simplified graphical representation of selected useraccessible entry points to pricing features in accordance with anembodiment of the present invention. A user 210, preferably a sales useraccesses the integrated price management system 220 in the course ofproposing, negotiating, finalizing or revising a deal. In the case wherea sales user is attempting to finalize a deal, the user may access thecontract form 230 in said system. The contract form allows the user toset the various parameters necessary for structuring a contract. In thecase where the user 210 wishes to include index pricing terms, the usermay access the index pricing dialog windows 260 directly from saidcontract form 230. Preferably, the user accesses the price negotiator240 initially, and subsequently brings up the index pricing dialogwindow 260 from the price negotiator 240.

In this manner, the user 210 may access any of the pricing tier dialogwindows 270 and the most favored nation (MFN) dialog windows 280. Theexecutive committee 190 may choose to allow the user 210 to access anyof the aforementioned windows through the policy manager 250.Preferably, policy is set by the executive committee 190, stored in thetransaction and policy database 150 and used to inform the pricemanagement system 220. In this manner, sales users may conducttransactions in accordance with policy through use of said pricemanagement system 220.

FIG. 3 is a simplified graphical representation of an enterprise pricingenvironment wherein pricing tier policy 310 is integrated into the pricemanagement system in an embodiment of the present invention. The systemis structured so as to allow a sales force 340 to engage in varioustransactions with customers 350. In the course of their interaction withcustomers 350, the sales force 340 has the ability to access both theprice negotiator 320 and the deal form 330. Pricing tier logic policy310 is set so that the sales force 340 may set and modify pricing tiersin accordance with policy in the course of negotiations.

FIG. 4 is a simplified graphical representation of an enterprise pricingenvironment wherein most favored nation (MFN) policy 410 is integratedinto the price management system in an embodiment of the presentinvention. Again, the system is structured so as to allow another salesforce 440 to engage in various transactions with customers 450. In thecourse of their interaction with customers 450, the sales force 440 hasthe ability to access both the price negotiator 420 and the deal form430. In some industries, it is advantageous for a sales force 440 tohave the ability to guarantee a customer 450 that the negotiated priceis, and will continue to be for the agreed upon time period, the lowestprice offered to any customer. Most favored nation (MFN) policy 410 isset so that the sales force 440 may set and modify agreed upon mostfavored nation clauses in accordance with policy in the course ofnegotiations.

FIG. 5 is a simplified graphical representation of an enterprise pricingenvironment wherein index pricing policy logic 510 is integrated intothe price management system in an embodiment of the present invention.The system is structured so as to allow yet another sales force 540 toengage in various transactions with still more customers 550. In thecourse of their interaction with customers 550, the sales force 540 hasthe ability to access both the price negotiator 520 and the deal form530. Often, a sales force will be engaged in the sale of a commodity orother product which has a related index. Said index is typicallypublished on a daily, weekly, monthly, quarterly or annual basis.Preferably, the index uses some combination of market sales history andforecast data to compute a pricing index which offers guidance to theindustry as to the value of a particular commodity or other product. Assuch, a sales force 540 may wish to tie the price of a product to anindex in order to account for changing market conditions. Index pricingpolicy 510 is set so that the sales force 540 may set and modify indexpricing terms in accordance with policy in the course of negotiations.

Tier-Based Pricing

FIG. 6 is a simplified graphical representation of a path taken by auser 610, preferably a sales user, when accessing and setting pricingtier policy within the context of an enterprise pricing environment inan embodiment of the present invention. At any point in the course ofnegotiations with a customer, a sales user 610 may utilize theintegrated price management system of the present invention to accessthe price negotiator 620. At an appropriate time in the course ofnegotiations, the user 610 may wish to access a pricing tier dialogwindow 630. Once accessed, the pricing tier dialog window 630 gives theuser 610 the option to set any of a number of pricing tier parameters640. Setting pricing tier parameters is discussed in more detail below.In this manner, sales users may advantageously incorporate pricing tierterms into the negotiation process on a real time basis. The systemassures that said terms will be incorporated in a manner consistent withpolicy set by, for instance, an executive committee.

FIG. 7 is a flowchart illustrating a method for calculating pricingtier-based terms in accordance with an embodiment of the presentinvention. A pricing tier-based term is a type of pricing term that isset during or after price negotiations. It allows the sales user toprovide pricing adjustment values for selected levels, or tiers, ofproduct quantity or total price achieved. For instance, the sales usermay choose to set quantity tiers whereby a different adjustment value isapplied for each quantity tier set. If the quantity in question is abovea certain threshold, the adjustment value for that tier is applied.Generally, as the quantity increases, and higher tiers are reached,greater adjustment values are applied. Tiers may also be based on totaldollar amount for a particular term. The method provides a means ofallowing sales users to negotiate and to capture theses various pricingtier-based terms.

For a particular transaction, sales users are able to capture allpricing terms which are based on tiers and use the information from thecaptured terms to apply adjustments for the entire transaction acrossdifferent products. On the other hand, where pricing tier-based termsapply only to a particular line item within a transaction, sales usersare able to negotiate and capture said pricing tiers and use theinformation to apply adjustments for that line item only.

FIG. 7 shows a flowchart 700 illustrating a method of calculatingpricing tier-based terms in accordance with an embodiment of the presentinvention. A user first selects a pricing tier-based term at step 710.

The user then sets the pricing tier type at step 720. The type caneither be Amount, Quantity or Percentage. When Amount is selected, thatmeans the tier adjustment will be based on some money value, i.e., totalsales price of a line item or total sales price of an entiretransaction. If Quantity is selected, that means the tier adjustmentwill be based on the quantity value of a line item or the quantity valueof an entire transaction. If Percentage is selected, the tier adjustmentpreferably will be based on the net margin percent of the transaction.

FIG. 7A shows a flowchart 720 a illustrating a method for selecting apricing tier type in accordance with an embodiment of the presentinvention. In particular, FIG. 7A is further illustrative of step 720 ofFIG. 7. At step 721, a user sets the pricing tier type as either Amountor Quantity or Percent. As discussed above, Amount designates a tiertype based upon the total sales price of the line item or transaction inquestion. Quantity designates a tier type based upon the total quantityof product contemplated in a particular line item or transaction.Percent designates a tier type based upon net margin.

The method then determines, at step 722, whether the user has set thetier type to Amount. If so, the user is prompted to specify a currencyat step 723. The user may either select a currency at step 725, or adefault currency will be set at step 726. If the user chooses not toselect a currency, the currency previously set on the line item or inthe transaction will be used as the default currency value for thecurrency field on the pricing tier. Once it is set, any changes on theform or line item will not affect the currency field on the pricingtier.

If, on the other hand, the user selects Quantity as the tier type atstep 723, the method prompts the user to specify a unit of measurement(UOM) at step 724. The user may either specify a UOM at step 728 orallow the method to set a default UOM at step 727. As in the case above,if the user chooses not to select a UOM, the UOM previously set on theline item or in the transaction will be used as the default UOM valuefor the UOM field on pricing tier. Once it is set, any changes on theform or line item will not affect the UOM field on the pricing tier.

If the user selects Percentage as the tier type, no further selectionsneed be made to further define said tier type.

Referring once again to FIG. 7, once the user has set the pricing tiertype at step 720, the user may then set the actual tiers at step 730.For instance, the user may select to set the pricing tier type toQuantity. The user may then set cut-off values to delineate a group oftiers. As such, the user may negotiate a volume based rebate where, forinstance, in a preferred embodiment, pricing adjustment values areassigned for a first tier of greater than zero units; a second tier ofgreater than 1000 units; a third tier of greater than 2000 units; and soon.

Various ranges may be used to define the tier levels as dictated bybusiness objectives. For example, tiers may be set as greater than orequal to 1 unit; greater than or equal to 1000 units; greater than orequal to 2000 units, and so on. Similarly, tiers may be defined as1-1000 units; 1001-2000 units; 2001-3000 units, and so on.

The units for each tier may vary to meet current business objectives.Preferably, units correspond to units of currency, units of measure, orpercentage units. Said preferred types of units may best be used withtire types of Amount, Quantity, and Percentage, respectively.

In step 740, the user sets an adjustment type. FIG. 7B shows a flowchart740 b illustrating a method for selecting an adjustment type inaccordance with an embodiment of the present invention. In particular,FIG. 7B is further illustrative of step 740 of FIG. 7. At step 741, theuser may select Percent, Money, or Unit Amount as an adjustment type.

If the user sets the adjustment type to Money in step 742, the user isthen prompted in step 744 to specify a currency for the Money adjustmenttype. For example, the user may choose to set the currency to U.S.dollars. Then, using the tiers set out in the example above, anadjustment value of $3 may be assigned to the first tier of 1-1000; $4may be assigned to the second tier of 1001-2000; $5 may be assigned tothe third tier of 2001-3000; and so on.

If, on the other hand, the user sets the adjustment type to Unit Amountin step 743, the method then prompts the user in step 745 to specifyboth a currency and UOM. For example, the user may choose to set thecurrency to U.S. dollars and set the UOM to pounds. Then, using thetiers set out in the example above, an adjustment value of $3/lb. may beassigned to the first tier of 1-1000; $4/lb. may be assigned to thesecond tier of 1001-2000; $5/lb. may be assigned to the third tier of2001-3000; and so on.

Finally, the user may set the adjustment type to Percent in step 741. Inthis case, the user need not set a currency or UOM to further define theadjustment type. The user need only set the value of the percentadjustment for each tier. For example, using the tiers set out in theexample above, an adjustment value of 3% may be assigned to the firsttier of 1-1000; 4% may be assigned to the second tier of 1001-2000; 5%may be assigned to the third tier of 2001-3000; and so on. As such, adiscount of 3%, 4%, and 5% is applied to each tier, respectively.

Referring again to FIG. 7, once the adjustment type is set in step 740,the user may set an adjustment value type in step 750. An adjustmentvalue type of actual or incremental may be set. If the adjustment valuetype is set to actual, then the specific discount for the implicatedtier is applied. If, however, the adjustment value type is set toincremental, then the cumulative value of all the discounts in tiers upto and including the implicated tier is applied.

For example, using the tiers set out in the example above, an adjustmentvalue of 3% may be assigned to the first tier of 1-1000; 4% may beassigned to the second tier of 1001-2000; 5% may be assigned to thethird tier of 2001-3000; and so on. As such, a discount of 3%, 4%, and5% is applied to each tier, respectively, in the case where theadjustment value type is set to actual. On the other hand, a discount of3% for tier one, 7% for tier two, and 12% for tier 3 is applied in thecase where the adjustment value is set to incremental.

Referring once again to FIG. 7, once the adjustment value type is set instep 750, the user may select the magnitude of the adjustment for eachtier in step 760. For example, once the adjustment type is set toPercent, the user must choose what percent discount to give for eachtier. Normally, the discount increases as the tiers progress towardsgreater volumes of product.

Once the magnitude of the adjustment value for each tier has been set,the user may set the pricing tier calculation type in step 770. FIG. 7Cshows a flowchart 760 c illustrating a method for selecting a pricingtier calculation type in accordance with an embodiment of the presentinvention. In particular, FIG. 7C is further illustrative of step 770 ofFIG. 7. At step 761, the user selects a pricing tier calculation type.The pricing tier calculation type may be either Point or Range. If thecalculation type has been set to Point at step 762, the method calls thePoint algorithm at step 763. If the calculation type has been set toRange, the method calls the Range algorithm at step 764.

Point vs. Range calculation is best illustrated by the followingexample: The user negotiates a Quantity based rebate that has thefollowing tiers: 3% for 1 to 1000 units, 4% for 1001 to 2000 units, and5% for 2001 units and above. If the calculation type is designatedRange, and the actual purchase resulted in 1500 units, the first 1000units purchased will yield a rebate of 3% and the remaining 500 unitswill yield a rebate of 4%. If the calculation type is designated as aPoint calculation, the rebate amount will always use the highest tierreached; in this example, the rebate would be 4% on the entire 1500units.

Referring once again to FIG. 7, once the calculation type has been setin step 770, the logic for calculating the actual adjustment value forthe pricing tier-based term is set in step 780. This adjustment value isused to adjust the price of the item in question according to theforegoing method. Any number of pricing tier-based terms may be set in aparticular deal. Said terms are recognized and said tier-based pricinglogic is called to compute product prices based on tier levels.

FIG. 8 shows a pricing tier dialog window illustrating a user interfacein accordance with an embodiment of the present invention. The salesuser is allowed to input desired parameters while negotiating a deal.The user may designate a tier calculation type which is shown at ashaving been designated Point. FIG. 8 further illustrates the tier typehaving been designated as Quantity; the adjustment type designated asUnit Amount; and the adjustment value type designated as Actual. Itshould also be noted that, in accordance with the process outlinedabove, the user, having designated the tier type as Quantity, must alsodesignate a UOM. In this particular embodiment, the user is allowed toselect a UOM from a pull down menu activated by the selection ofQuantity as the tier type. Furthermore, since the user designated UnitAmount for adjustment type, both a unit of measure and a currency mustbe defined for adjustment type. Once the user has designated the aboveparameters, an adjustment value may be calculated.

FIG. 9 shows a pricing tier dialog window illustrating a user interfacein accordance with an embodiment of the present invention. In thisexample, the user has designated a tier calculation type as Point. FIG.9 further illustrates the tier type having been designated as Amount;the adjustment type designated as Unit Amount; and the adjustment valuetype designated as Incremental. It should also be noted that, inaccordance with the process outlined above, the user, having designatedthe tier type as Amount, must also designate a currency. In thisparticular embodiment, the user is allowed to select a currency from apull down menu activated by the selection of Amount as the tier type.Furthermore, since the user designated Unit Amount for adjustment type,both currency and UOM must also be designated. Once the user hasdesignated the above parameters, an adjustment value may be calculated.

FIG. 10 shows a contract/deal window illustrating a user interface inaccordance with an embodiment of the present invention. In this example,the user has the option of clicking on the margin rebate button in thehighlighted area in order to bring up the pricing tier dialog window.Normally, this is done in the context of a deal-level tier-based pricingterm and the margin applies to the entire deal.

FIG. 11 shows a price negotiator window illustrating a user interface inaccordance with an embodiment of the present invention. In this example,the user has the option of clicking on the rebate tier button in thehighlighted area in order to bring up the pricing tier dialog window.Normally, this is done in the context of a line-item tier-based pricingterm as a volume rebate adjustment.

FIG. 12 shows a policy manager window illustrating a user interface inaccordance with an embodiment of the present invention. Preferably,pricing tier terms are used within the volume rebate policy tableincluded in the Policy Manager policy tables. The user may click on theNew button or select a row in the table and click on Open to bring upthe policy record details page.

FIG. 13 shows a policy maker window illustrating a user interface inaccordance with an embodiment of the present invention. In this example,the user has the option of clicking on the Volume Break button in thehighlighted area in order to bring up the pricing tier dialog window.

The following table shows selected example combinations of input andoutput values that may be generated when utilizing the method of thepresent invention. This provides detailed examples to illustrate howpricing tier calculations are performed in accordance with an embodimentof the present invention. The table shows combinations of input andoutput value types that make sense for tier calculation. All commentsrefer to the following table, with the value of 2010 as the input foreither Quantity, Amount or Percentage.

TABLE 1 Adjustment Adjustment Adjustment Tier Type Tier Type Tier TypeType Type Type Quantity Amount Percentage Percent Money UnitAmount   >0lb >$0 >0% 3% $3 3 cent/lb >1000 lb >$1000 >1000% 4% $4 4 cent/lb >2000lb >$2000 >2000% 5% $5 5 cent/lb Calculation Adjustment Adjustment TypeTier Type Type Value Type Explanation Point Qty Percent Actual Discountis 5% Point Qty Percent Incremental Discount is 3% + 4% + 5% = 12% PointQty Money Actual Discount is $5 Point Qty Money Incremental Discount is$3 + $4 + $5 = $12 Point Qty UnitAmount Actual Discount is 5 cent/lbPoint Qty UnitAmount Incremental Discount is 3 cent/lb + 4 cent/lb + 5cent/lb = 12 cent/lb Point Amount Percent Actual Discount is 5% PointAmount Percent Incremental Discount is 3% + 4% + 5% = 12% Point AmountMoney Actual Discount is $5 Point Amount Money Incremental Discount is$3 + $4 + $5 = $12 Point Amount UnitAmount Actual Discount is 5 cent/lbPoint Amount UnitAmount Incremental Discount is 3 cent/lb + 4 cent/lb +5 cent/lb = 12 cent/lb Point Percentage Percent Actual Discount is 5%Point Percentage Percent Incremental Discount is 3% + 4% + 5% = 12%Point Percentage Money Actual Discount is $5 Point Percentage MoneyIncremental Discount is $3 + $4 + $5 = $12 Point Percentage UnitAmountActual Discount is 5 cent/lb Point Percentage UnitAmount IncrementalDiscount is 3 cent/lb + 4 cent/lb + 5 cent/lb = 12 cent/lb Range QtyPercent Actual For the 1^(st) 1000 lb, give 3% discount. For the 2^(nd)1000 lb, give 4% discount. For the next 10 lb, give 5% discount.Discount total is 1000 lb * 3% + 1000 lb * 4% + 10 lb * 5% = 30 lb + 40lb + .5 lb = 70.5 lb/ 2010 lb = 3.48% as the return discount value.Range Qty Percent Incremental For the 1^(st) 1000 lb, give 3% discount.For the 2^(nd) 1000 lb, give 3% + 4% = 7% discount. For the next 10 lb,give 3% + 4% + 5% = 12% discount. Discount total is 1000 lb * 3% + 1000lb * 7% + 10 lb * 12% = 30 lb + 70 lb + 1.2 lb = 101.2 lb/ 2010 lb =5.03% as the return discount value Range Qty Money Actual Invalidcombination Range Qty Money Incremental Invalid combination Range QtyUnitAmount Actual For the 1^(st) 1000 lb, give 3 cent/lb discount. Forthe 2^(nd) 1000 lb, give 4 cent/lb discount. For the next 10 lb, give 5cent/lb discount. Discount total is 1000 lb * 3 cent/lb + 1000 lb * 4cent/lb + 10 lb * 5 cent/lb = $30 + $40 + $0.5 = $70.5/2010 lb = 3.48cent/lb as the return discount value. Range Qty UnitAmount IncrementalFor the 1^(st) 1000 lb, give 3 cent/lb discount. For the 2^(nd) 1000 lb,give 3 cent/lb + 4 cent/lb = 7 cent/lb discount. For the next 10 lb,give 3 cent/lb + 4 cent/lb + 5 cent/lb = 12 cent/lb discount. Discounttotal is 1000 lb * 3 cent/lb + 1000 lb * 7 cent/lb + 10 lb * 12 cent/lb= 30 cent + 70 cent + 1.2 cent = 101.2 cent/2010 lb = 5.03 cent/lb asthe return discount value Range Amount Percent Actual For the 1^(st)$1000, give 3% discount. For the 2^(nd) $1000, give 4% discount. For thenext $10, give 5% discount. Discount total is $1000 * 3% + $1000 * 4% +$10 * 5% = $30 + $40 + $0.5 = $70.5/$2010 = 3.48% as the return discountvalue. Range Amount Percent Incremental Range Amount Money Actual RangeAmount Money Incremental Range Amount UnitAmount Actual Range AmountUnitAmount Incremental Range Percentage Percent Incremental For the1^(st) 1000%, give 3% discount. For the 2^(nd) 1000%, give 3% + 4% = 7%discount. For the next 10%, give 3% + 4% + 5% = 12% discount. Discounttotal is 1000% * 3% + 1000% * 7% + 10% * 12% = 30 + 70 + 1.2 =101.2/2010 = 5.03% as the return discount value NOTE: The calculation isdone by treating the tier type Percentage value as a regular numberwithout the percent sign Range Percentage Money Actual InvalidCombination Range Percentage Money Incremental Invalid Combination RangePercentage UnitAmount Actual Invalid Combination Range PercentageUnitAmount Incremental Invalid Combination

As can be seen from the above table, the method of the present inventionallows the sales user to negotiate, capture and calculate pricing termsbased on tiers. Depending upon the business objectives, the user mayprovide adjustments based on total purchase Quantity, total dollar orother currency value of the purchase, or net margin percentage.

Depending upon business structure and objectives, pricing tierparameters may be set at any stage throughout the life of a particulardeal. Pre-set pricing tier policy can be set in place before the deal isnegotiated. For example, a tiered set of margin discounts may beestablished as policy to affect deals globally. On the other hand,volume discounts may be either pre-set or entered on an ad hoc basis bythe sales user as a line item.

MFN Features

FIG. 14 is a flowchart illustrating a process for calculating potentialMost Favored Nation (MFN) impact for a proposed price in any new deal.MFN is a status accorded a product or set of products in a deal suchthat said product or set of products in said deal for a defined timeperiod will be guaranteed to be priced at or below the lowest price forsaid same product or set of products in any other valid deal in saidintegrated price management system over the same time period. MFN allowsa vendor to assure a customer that the negotiated price is, and willremain for the agreed time period, the lowest price offered by thevendor to any customer and, as such, the lowest price for said productor set of products in said price management system. Said lowest price isthe MFN price.

FIG. 14 is a flowchart 1400 illustrating a process for calculatingpotential MFN impact for a given proposed price in any new deal inaccordance with an embodiment of the present invention. Every time a newdeal is reached, or an existing deal is revised, there is a potentialMFN impact across all existing deals in the price management systemhaving products or product sets with MFN status. For instance, as a newdeal is being negotiated, or an existing deal is being revised, anyproposed price for a product or set of products may trigger an automaticMFN adjustment in existing deals having the same products or productsets with MFN status in the system. In particular, if the proposed priceis lower than the MFN price, it represents a potential MFN violation. Ifthe proposed price for a particular product or product set is approved,thereby setting a new MFN price, all existing deals having the sameproduct or product set with MFN status in the system must be revised sothat said product or product set is priced at the new MFN price.

Referring again to FIG. 14, negotiations for a new deal begin in step1410. The customer, product and time period for the new deal are set instep 1420. Once a proposed price is set in step 1430, all existing dealsin the price management system are searched for potential MFN violationsin step 1440. If a violation is not found at step 1450, the method endsand the new deal can be finalized. If, however, a violation is found atstep 1450, the user is given an alert warning at step 1460 indicatingviolation of an existing MFN clause. The method then displays, at step1470, the total revenue impact which would result from the proposed MFNviolation. After the total revenue impact is displayed, the user mayapprove or disapprove of the proposed price in the new deal at step1480. If the proposed new price is not approved, the method returns tostep 1430 and a new price is proposed or negotiations end. If theproposed price is approved, owners of all affected deals are notified atstep 1490 so that appropriate MFN adjustments can be made. The methodguarantees that all products or product sets with MFN status in thesystem with continue to be priced at the lowest price offered in thesystem for the duration of the time period for which MFN status had beenguaranteed. It also allows a user, while negotiating a new deal, to seethe total revenue impact of any MFN violation resulting from a proposedprice during the negotiation process.

FIG. 14A is a flowchart 1470 a which further illustrates step 1470 ofFIG. 14, discussed above. Once an MFN violation alert is given, the useris shown, at step 1471, the total revenue impact, over the entireimplicated time period, across all affected deals in the system. Theuser is also shown, at step 1472, the total revenue impact across allaffected deals in the system for the current time period only. Themethod also displays, at step 1473, the total revenue impact for eachaffected deal individually. Each affected deal is further broken out, atstep 1474, to display each implicated time period in each deal. Thecommitted quantity of product for each implicated time period in eachaffected deal is displayed at step 1475, and the total revenue impactfor each implicated time period in each affected deal is displayed atstep 1476. In this manner, the method allows the user, during thenegotiation process, to see with fine granularity the potential MFNimpact of a proposed price, before offering said price to a potentialbuyer. This allows the user to make an informed decision in real timeduring negotiations.

The level of approval necessary for approving a MFN violation may varyaccording to business structure and objectives. Preferably, a salesmanager must approve said violation. More preferably, said approval mustgo through a number of stages up to and including the executivecommittee.

FIG. 15 is a simplified graphical representation of the path followed bya sales user when accessing an MFN dialog window in accordance with andembodiment of the present invention. Preferably, the user 1510 accessesthe price negotiator 1520 in the course of negotiating a deal. If theuser chooses to propose granting MFN status 1530, or implicate anexisting MFN clause by offering a price lower that the current MFNprice, the MFN impact dialog window 1540 is invoked. There, a user mayanalyze the impact of a MFN violation, as discussed above.

FIG. 16 is a flowchart 1600 illustrating a process for calculating anMFN adjustment value for a new deal in accordance with an embodiment ofthe present invention. Negotiations begin at step 1610. The customer,product and time period are set at step 1615. The user must then decidewhether or not to grant MFN status for said product at step 1620. If theuser chooses not to grant MFN status, the method ends. If, however, theuser grants MFN status, the proposed price must be set at or below thecurrent MFN price at step 1625. Once the proposed price is set, allexisting deals in the price management system are searched for any MFNviolation at step 1630. If the proposed price is set at the current MFNprice, there is no MFN violation and the method goes to step 1660discussed below. If, however, the proposed price is set below thecurrent MFN price, a violation will be found at step 1635 and an MFNviolation alert warning is given at step 1640. The revenue impact of theproposed MFN violation is displayed at step 1645. The details of therevenue impact are displayed as discussed above. The user must decide atstep 1650 whether or not to approve the proposed price. If the proposedprice is not approved, the method returns to step 1625 and a new priceis proposed or negotiations end. If the proposed price is approved, theowners of all affected deals in the system are notified at step 1655 sothat appropriate adjustments can be made. Next, the MFN adjustment valuefor the new deal is calculated at step 1660. The MFN adjustment value isthe difference between the invoice price and the MFN price offered. TheMFN adjustment value is displayed at step 1665.

FIG. 17 is a flowchart 1700 illustrating a process for calculating theMFN impact of revised deals. A proposed revised price is set at step1710. Once a proposed price is set in step 1710, all existing deals inthe price management system are searched for potential MFN violations instep 1720. If a violation is not found at step 1730, the method ends andthe deal can be revised. If, however, a violation is found at step 1730,the user is given an alert warning at step 640 indicating violation ofan existing MFN clause. The method then displays, at step 1750, thetotal revenue impact which would result from the proposed MFN violation.After the total revenue impact is displayed, the user may approve ordisapprove of the proposed revised price at step 1760. If the proposednew price is not approved, the method returns to step 1710 and a newrevised price is proposed. If the proposed price is approved, owners ofall affected deals are notified at step 1770 so that appropriate MFNadjustments can be made.

Preferably, all deals which are being revised or re-priced are checkedfor MFN violations.

FIG. 18 shows a stored MFN information window illustrating a userinterface in accordance with an embodiment of the present invention. Theexample user interface illustrates a window where the user can accessall deals in the price management system which contain MFN clauses. Theuser may input pertinent information such as product, price and timeperiod in order to retrieve only those deals affected by the proposedprice.

FIG. 19 shows an MFN impact window illustrating a user interface inaccordance with an embodiment of the present invention. Whilenegotiating a new deal using the Price Negotiator, the method allows theuser to bring up a screen which displays the total MFN revenue impact ofthe proposed new deal. The revenue impact can be displayed, for example,in terms of overall impact; impact for the current period; total impactfor each affected deal; impact for each period of each affected deal;and total impact by commitment period. In this way, the user may make afully informed decision as to whether or not to approve of the proposedprice in question. Of course, any impact beyond the current period isonly potential impact. If, for example, buyer does not meet commitmentvolume, or future indexes change, there may be no MFN impact.

Index-Based Pricing

FIG. 20 is a simplified graphical representation of a path taken by auser to access index-based pricing dialog windows in accordance with anembodiment of the present invention. Preferably, a user 2010 accessesthe price negotiator 2020 in the course of negotiating a deal. Ifappropriate, the user may access the index-based price dialog window2040. The user may set various parameters for calculating an index-basedprice by bringing up the formula window 2040 wherein the user will beable to set index-based pricing parameters 2050.

Temporary Voluntary Allowance

A temporary voluntary allowance (TVA) is a time and volume limiteddiscount on an existing product price. For example, a TVA may grant adiscount in currency per unit volume for product purchased above adesignated threshold volume. The TVA may be initially set up in a newdeal, or may be incorporated as a revision into an existing deal.Preferably, the deal is structured to allow for multiple temporaryvoluntary allowances over the life of the contract.

It is often advantageous to offer a buyer a discount for purchasingadditional product above some set baseline amount. A vendor may haveexcess inventory on hand with a limited shelf life. Often, moving alarger volume of product, even at a reduced margin, is beneficial to thevendor. The method of the instant invention allows a vendor to settemporary volume allowances on an ad hoc basis as determined by businessobjectives. The method allows the user to flexibly set desired TVAparameters and immediately see the fiscal impact application of the TVAwill have over the life of the deal. In this way, the instant inventionallows the user to make informed, timely business decisions regardingthe efficacy of volume discount. In effect, the user sets an index on anad hoc basis in response to business needs. Product above the selectedthreshold is priced using said as hoc index.

The user may input into the price management system desired parametersfor the TVA as dictated by the particular deal. Preferably, the userwill set a time limit (effective from—effective to); a maximum volumesubject to the temporary allowance; and a TVA Amount which defines thediscount in terms of price per unit of measure.

FIG. 21 is a flowchart 2100 illustrating a process for making atemporary voluntary allowance in a deal in accordance with an embodimentof the present invention. The process, within the context of theintegrated price management system, enables the user to include a TVA inany deal in the system. The user may advantageously define theparameters of the TVA so as to meet the specific business objectives ofthe particular deal.

Referring again to FIG. 21, at step 2110, the user selects a new orexisting deal. The user must choose whether to include or add a TVA tothe selected deal at step 2115. If the user chooses not to include a TVAin the deal, the method ends. If the user chooses to include a TVA, theuser may choose the commitment periods for which the TVA will beeffective at step 2125. The user may also set the TVA Amount at step2130. TVA Amount defines the discount in terms of price per unit ofmeasure. For instance, for a product sold by the pound using the dollaras the exchange currency, a TVA Amount could be set in terms of $/lb or¢/lb. In particular, a user may set a TVA discount of 2¢/lb. The usermay then set a TVA Volume at step 2135. The TVA volume represents athreshold volume above which the TVA discount applies. The user may thendecide whether to set a TVA for the next commitment period at step 2140.Once all TVAs are set, the method then computes TVA adjustment at step2145. The TVA adjustment is the total amount of discount granted giventhe parameters set out above and the actual commitment volume of thedeal. This TVA adjustment value is displayed at step 2150. Variousaspects of the impact of including the TVA in the deal are displayed andare discussed in further detail below. The user may use the informationdisplayed to make an informed business decision as to whether or not togrant the TVA at step 2160. If, based on this information, the userchooses not to approve the deal with the TVA as defined, the methodreturns to step 2115 allowing the user to set new TVA parameters.Iterations of the above process continue until the user either approvesof the specified TVA or chooses not to include a TVA in the deal. If theuser chooses not to include a TVA, the method is terminated. Once theuser approves of a specified TVA, the computed TVA Adjustment isincorporated into the invoice price at step 2165. The transaction maythen be priced at step 2170 wherein the TVA Adjustment is included.

FIG. 21A is a flowchart 2150 a illustrating a process for computing anddisplaying various aspects of the impact of including a TVA in a deal inaccordance with an embodiment of the present invention. Once the TVAparameters, such as Volume, Amount and time limit, are set, the methoddisplays the impact of applying the TVA adjustment to the deal for theset time period at step 2151. The method then determines whether aprevious TVA had been granted in the deal at step 2152. With thisinformation, the method computes the total TVA impact over the life ofthe deal at step 2153. The method then displays the total TVA impactover the life of the deal at step 2154, and breaks out the total TVAimpact for each commitment period over the life of the deal at step2155.

Index Pricing

Indexes, which are generally known in the art, have been employed in avariety of manners. Stock markets, for example, often use indexes as agauge of general market condition. Other indexes measure the movement innational and international prices for commodities and other items oftrade. For instance, in the chemical industry, well known periodicindexes are used to establish the index price of various bulk chemicals.Said indexes may be published on a daily, weekly, monthly, quarterly orannual basis.

Given the potential volatility in the future price of a particularcommodity, it is often to the advantage of both buyer and seller to tiethe price of a particular product to an agreed upon index or indexes.The customer's choice of indexes will vary depending upon industrysegment for which they buy, the region where they are located, as wellas the major commodity categories they buy in volume quantities.Customers must focus upon commodity-specific questions pertaining toproduct delivery speeds (leadtimes) and price trend expectations.

An index publication determines marketplace transaction prices based ondata collected via surveys and interviews with buyers, sellers,distributors, other market insiders, and through data-collectionarrangements with other news-analysis agencies and research groups.

Index prices do not necessarily represent levels at which transactionshave actually occurred. They are designed to show monthly spot marketpurchase order averages and are intended primarily to indicatemonth-to-month trends. Specific prices any buyer pays will vary widelydepending on volume, market factors, distribution issues, specificationvariances, surcharges, packaging fees and other factors.

Price index numbers measure relative price changes from one time periodto another. They are so widely used that discussions related to indexnumbers in contract pricing normal refers to price indexes. However,other index numbers could be used in contract pricing, particularlyindexes that measure productivity.

Simple index numbers calculate price changes for a single item overtime. Index numbers are more accurate if they are constructed usingactual prices paid for a single commodity, product or service ratherthan the more general aggregated index.

Aggregate index numbers calculate price changes for a group of relateditems over time. Aggregate indexes permit analysis of price changes forthe group of related products, such as price changes for apples,oranges, plywood, or nails. An example of an aggregate price index isthe Producer Price Index (Bureau of Labor Statistics) that providesinformation the changes in the wholesale price of products sold in theUnited States over a given period of time.

Data sources used in formulating indexes include:

Bureau of Labor Statistics;

Other Government agencies;

Government contracting organizations;

Commercial forecasting firms;

Industry or trade publications; and

Newspapers.

Indexes are often published in a manner which gives one the ability tochoose a particular index position from various positions offered forthe same time period. For instance, over a given three month period, anindex may report a high, middle and low index position. There may alsobe reported a three month rolling average. Any or all of these indexesmay be utilized by a sales force as dictated by business policies andobjectives in accordance with the present invention.

The method of the instant invention allows the user to advantageouslyincorporate desired indexes into the pricing process within the contextof the integrated price management system. The user is able to choosethe index or combination of indexes which integrate best with the user'soverall business objectives. The user chooses the index and the selectedreference period. The user may also select the index position for theselected index. The present method allows the user to combine all of theindex data through a user defined formula to calculate an index-basedprice.

FIG. 22 is a flowchart 2200 illustrating a process for calculating anindex-based price in accordance with an embodiment of the presentinvention. The flowchart 2200 shows, as an example, a process forcalculating an index-based price using a chemical index publication. Atstep 2210, the user selects a product to be priced. The user thenselects the desired chemical index publication upon which to base theprice calculation at step 2220. The user may also select the referenceperiod at step 2230. For example, the user may choose to base theindex-based price calculation on the three month rolling average of thechosen index. The user may also select an index position at step 2240.Indexes afford the user the ability to choose a price position withinthe index depending upon user preferences. For example, over a chosentime period, an index may have a high price, an average price, and a lowprice. The user may select which price position within the chosen indexshould be used to calculate the index-based price. The user then definesa formula at step 2250. The formula makes use of the selected indexinformation to calculate the index based price at step 2260. The usermay define the formula by advantageously setting the index offsets andchoosing the proper weighting for each chosen index. The process ofdefining the index-based formula is discussed in more detail below.

FIG. 22A is further illustrative of step 2250 discussed above. Inparticular, FIG. 22A is a flowchart 2250 a illustrating a process fordefining a formula for calculating an index-based price in accordancewith an embodiment of the present invention. Once the user has selecteda product, an appropriate index publication, a reference period, and anindex position during said selected period, the user may define aformula to calculate an index price. The method plugs the above chosenparameters into the user defined formula to calculate the index price.In this way, the user may flexibly define both the parameters and theformula used to calculate the index-based price. In accordance with themethod of the present invention, the user may, in real time, access andmanipulate index price information to develop a pricing strategy thatbest suits the user's business objectives.

Referring again to FIG. 22A, once the user has defined the mostadvantageous index-price parameters, the user may define a formula tocalculate an index-based price. The user sets variables at step 2251.The variables may include, for example, an offset adjustment from thechosen index. For instance, the user may set variables such that theprice used in the index-based price calculation is equal to the chosenindex price plus or minus an offset adjustment value. The user may alsoset operators to be used in the calculation of the index-based price atstep 2252. Operators may be defined to give appropriate weight to eachof the chosen indexes in the actual calculation. For instance, theselected product may consist of a number of component raw materials.Each raw material may have an individual commodity index price. Eachcomponent price may be assigned a weighted percentage factor to be usedin the calculation of the product's index-based price. For instance, acomponent whose price is particularly volatile, or a component whichmakes up a large percentage of the product, may be given more or lessweight in the calculation of the product index-based price dependingupon businesses objectives. Once a formula is defined, it may be savedat step 2253. The method then returns to step 2260 in FIG. 22 where theindex-based price is calculated.

FIG. 23 shows an index-based formula window illustrating a userinterface in accordance with an embodiment of the present invention. Theuser may select the parameters to be used in calculating an index-basedprice as discussed above. In particular, the user chooses a usefulfunction name into which chosen parameters are plugged. The user setsthe parameters to be used in the calculation. For instance, the userchooses the index publication to be used for calculating the index-basedprice. The user may also select a reference period used to define thetime window from which the index price is taken. The user may alsodefine an index position within said reference period whereby a high,low or average index price over the defined time window is selected.

The user utilizes the parameters selected above in a user-definedformula to calculate the index-based price. In building the formula, theuser may define both variables and operators so as to achieve thedesired index-based price in accordance with business objectives. Asnoted above, variables may be used to define an offset adjustment togive an adjusted price above, below or equal to the selected indexprice. Operators may be used to select the appropriate weight to beassigned to each said adjusted price in the calculation of theindex-based price. Any combination of indexes, variables and operatorsmay be used to create the desired formula.

FIG. 24 shows an index-based formula window illustrating a userinterface wherein an index-based formula has been selected in accordancewith an embodiment of the present invention. The user sets the formulaname, index parameters, variables and operators as discussed above. Oncethe above parameters have been selected, the method creates a formulaused to calculate an index-based price.

BOM-Based Index Pricing

FIG. 25 is a flowchart 2500 illustrating a process for calculating anindex-based price wherein the selected product may be made up of adefined bill of materials (BOM) in accordance with an embodiment of thepresent invention. The flowchart 2500 shows, as an example, a processfor calculating an index-based using a chemical index publication. Atstep 2510, the user selects a product to be priced wherein said productmay be made up of a set of components which make up the product's BOM.The method then determines if the product's BOM is greater than one atstep 2515. A BOM greater than one indicates that the product is made upof more than one component. If the BOM is not greater than one, themethod ends. If the BOM is greater than one, the method lists allcomponents in the BOM at step 2520. The percentage of each component inthe product is listed at step 2525. The user then selects a componentfrom the BOM list at step 2530. A suitable chemical index publication isselected at step 2535. The user sets the desired reference period fromwhich to take the index price at step 2540. An index position isselected at step 2545. The user may then add said index parameters to aformula at step 2550 which may be used to calculate an index-based pricefor the product at step 2565. The user may set variables and operatorsto be used in the formula as discussed above. Once a component index hasbeen added to said formula, the user may decide to add another componentat step 2555. Once all components have been added, the user maycalculate the contribution to the product price of each component atstep 2560. Once the user indicates that all desired componentindex-based prices have been calculated, the method calculates theindex-based price for the product at step 2565.

In a preferred embodiment, the user selects a product to be pricedwherein said product may be made up of a set of components which make upthe product's BOM. The method then determines if the product's BOM isgreater than one. If the BOM is greater than one, the method lists allcomponents in the BOM. The percentage of each component in the productis also listed. The user then selects a component from the BOM list. Asuitable chemical index publication is selected. The user sets thedesired reference period from which to take the index price. An indexposition of high, low or average price is then selected. At this point,all of the necessary parameters for the component have been set. Once acomponent's parameters have been set, the user may indicate whether asubsequent component's parameters are to be set. If so, the methodreturns to begin the next iteration of setting component parameters.Once the user indicates that all desired component parameters have beenset, the user may define a formula to calculate an index-based price forthe selected product. The user may set variables and operators to beused in the formula as discussed above. The formula is then used tocalculate the index-based price for the selected product.

The method allows the user to structure the index-based pricecalculation flexibly, as dictated by business needs. For instance, aformula may be defined for each component and used to calculate anindividual index-based price for each. Said individual index-basedprices may then be used to calculate an overall index-based price forthe selected product as discussed above. In another embodiment, saidindividual index-based prices may be plugged into a final formuladefined to use said individual index-based prices to calculate theoverall index-based price for the selected product. In yet anotherembodiment, parameters for each component are set and a single formulais defined by the user to calculate an index-based price for theselected product using said parameters. Advantageously, the user may useany combination of individually calculated index-based component pricesand selected component parameters to be plugged into a user definedformula for calculating the overall index-based price of the selectedproduct.

FIG. 26 shows a product selection window illustrating a user interfacein accordance with an embodiment of the present invention. The user mayselect a catalog to display a list of related products. Products with aBOM with more than one component are indicated by a highlighted productname. By clicking on the highlighted product name, the user can bring upa screen showing the product BOM.

FIG. 27 shows a product BOM window illustrating a user interface whereina selected product's BOM is displayed in accordance with an embodimentof the present invention. The product ID and product name are displayedabove the listing of the product BOM. The product BOM listing containseach component's name and the default mix ratio of the amount of eachcomponent in the product.

FIG. 28 shows an index-based formula window illustrating a userinterface wherein the selected product has a BOM greater than one inaccordance with an embodiment of the present invention. The windowillustrates a pricing BOM which may be used in calculating anindex-based price for the selected product. The window shows each BOMcomponent and the default mix ratio of each component in the selectedproduct. The user may select an index publication, a reference periodand an index position for each of the components. The user may select toaccept the default mix ratio, or may use the formula builder to set achosen weighted ratio to be used in calculating the index-based pricefor the selected product. All of the above selected parameters areincorporated into a user defined formula used to calculate theindex-based price for the selected product.

Index-Based Periodic Re-Pricing

Since indexes are published periodically, they may be usedadvantageously to periodically re-price existing deals in the integratedprice management system in accordance with an embodiment of the presentinvention. By tying a product's price to selected indexes in an originaldeal, vendors may incorporate future price fluctuations in productcomponents into the invoice price of the product. It is oftenadvantageous for both vendors and buyers to structure a deal so as toallow a product's invoice price to track fluctuations in the indexprices of the various product components. This is particularly usefulwhen one or more of a product's components is prone to large pricefluctuations due to changing market conditions. The method of thepresent invention allows vendors and buyers to account for futurefluctuations as a deal is being formulated.

As noted above, there are several index publications that are commonlyreferred to in industry as guideposts for pricing. In the chemicalindustry, for example, there are several well known indexes (e.g. CMAI,ICIS, DeWitt) which publish weekly or monthly. Each index publishesseveral index numbers for each product (e.g. average price, high price,low price and spot deal price). For those deals in the system withproducts that are tied to an index, the method of the instant inventionperiodically re-prices said products in conjunction with changes in theindex price.

The method of the instant invention selects existing deals in the pricemanagement system which are still valid and have products tied to anindex. Said selected deals are revised and re-priced according toparameters set out in the original deal or parameters agreed upon at thetime of revision. Once the deal has been revised and re-priced, it issubmitted for approval. If approved, new price records are generated foreach remaining commitment period.

FIG. 29 is a flowchart 2900 illustrating a process for establishingperiodic re-pricing for a selected deal in accordance with an embodimentof the present invention. In a preferred embodiment, the system monitorsand notes changes in selected indexes each commitment period at step2910. All deals with products tied to said indexes are retrieved at step2915. The current index-based price is then computed as step 2920. Allaffected deals are subsequently re-priced at step 2925, and new pricerecords for each commitment period are generated at step 2930. All validfuture records are updated at step 2935. The process continues until allaffected deals have been re-priced at step 2940.

In a preferred embodiment, the product price is tied to a selectedindex. The deal is structured such that each time the selected index ispublished, the product is re-priced. The product is given an index-basedprice according to the method discussed above. If approved, the productis re-priced accordingly for each subsequent commitment period. Inanother embodiment, the deal is structured such that the product isre-priced quarterly, using a three month rolling average of a selectedindex to set the revised price. In yet another embodiment, the deal isstructured such that each time the selected index is published, and thedifference between the current product price and the selected index isgreater than a selected threshold value, the product is re-priced.

Referring again to FIG. 29, once the deal is re-priced at 2925, the newprice records are saved in the integrated price management system.

In an alternative embodiment, a process for performing periodicindex-based re-pricing in the context of an integrated price managementsystem may be triggered by an alert. The system alerts the user when arevision has been triggered. A revision may be triggered, for example,when an index to which the price of a selected product has been tied ispublished. The publication of the selected index would trigger thesystem to prompt the user to decide whether or not to revise theimplicated deal. If the user chooses not to revise the deal, the methodends. If the user chooses to revise the deal, a revised index-basedprice is calculated according to the parameters set in the deal. Theuser is then prompted to approve of the revised price. Often, the dealis structured as a floating contract based on the selected index andrevision is approved automatically. If not, the user must approve therevision before proceeding to the next step. Revised price records foreach commitment period are generated. All valid future records areupdated at step 1960. The method then determines whether all deals inwhich a revision has been triggered have been re-priced. If so, themethod ends. If not, the method returns and performs a new iteration ofthe above process. The method continues in this manner until allimplicated deals are re-priced.

FIG. 30 shows a periodic contract update window illustrating a userinterface in accordance with an embodiment of the present invention. Thescreen prompts the user when contracts subject to periodic updates havetriggered in response to having had the selected re-pricing parametersmet. The user is shown a list of the contracts to be re-priced. In apreferred embodiment, the user is shown the contract number, revisionnumber, customer, contract revision status, and current commitmentperiod. The user is given the option whether to re-price the displayedcontracts as prompted.

FIG. 31 shows a periodic re-pricing parameter window illustrating a userinterface in accordance with an embodiment of the present invention. Theuser may select the parameters for re-pricing including the periodicre-pricing date. In a preferred embodiment, the user may define aformula for calculating a revised index-based price for the selectedproduct. The user may also set the period for said periodic re-pricing.Preferably, the period is set to coincide with the period of thepublication of the selected index.

Price Protection

One method of reducing the uncertainty of having a product's price tiedto a potentially volatile index is to build in price protection to theoriginal deal. Price protection guarantees that an index-based productprice will remain the same for a selected period beyond the time when anew index is published. Price protection, in effect, allows the actualproduct price change to lag the index price change by the selected timeperiod. The vendor may build price protection into a deal so that it isautomatically applied by the integrated price management system.

FIG. 32 is a flowchart 3200 illustrating a process for applying a priceprotection attribute to a deal in accordance with an embodiment of thepresent invention. The user selects a deal at step 3210. The user thensets the price protection duration at step 3215. The method then selectsa product in the deal at step 3220. The method then retrieves theinvoice price for the selected product from the current period at step3225. The effective invoice price is set to the invoice price from theprevious period at step 3230. The method then calculates the differencebetween the effective invoice price and the current index price at step3235. The calculated difference is shown as a price protectionadjustment at step 3240. The method then determines if there are moreproducts in the deal to which to apply price protection at step 3255. Ifso, the method returns to step 3220 and repeats the process until theprice protection adjustment for all products in the deal is calculated.The method then adjusts the implicated invoiced prices accordingly atstep 3250. Once all price protected deals have been adjusted in thismanner, the method ends.

FIG. 33 shows a price protection terms window illustrating a userinterface for setting price protection terms in accordance with anembodiment of the present invention. When in the contract form, the usermay set price protection terms, such as price protection duration, byaccessing the pull-down menu.

FIG. 34 shows a price protection calculations window illustrating a userinterface for showing price protection calculations in accordance withan embodiment of the present invention. The user may see the impact ofthe price protection calculation for the life of the deal.

Draw Material Escape Clause

The present invention also allows a sales force to incorporate a rawmaterial escape clause into a deal in accordance with an embodiment ofthe invention. Typically, a raw material escape clause is offered in thecontext of negotiating the sale of a product or products which are madeup of more than one component. At least one of these components will bepriced using index pricing. Often, only one or two components of aparticular product will be of interest to the buyer and seller withrespect to volatility. As such, the buyer may wish to build in priceprotection for the product to insulate said buyer from drastic marketswings. However, the seller may not wish to guarantee the price beyond acertain threshold percentage change in price.

In a preferred embodiment of the present invention sales users mayincorporate a raw material escape clause into the deal. The raw materialescape clause gives the parties the option of selecting a particularlyvolatile or expensive raw material component of a product for limitedprice protection. While the product price may be protected for a setprice protection period as discussed above, there is also a thresholdpercentage change in price above which price protection no longerapplies. The raw material escape clause allows the parties to escape theprice protection period and pass on significant price fluctuationsimmediately. Both upward and downward price fluctuations in excess ofthe threshold percentage may trigger the raw material escape clause.

FIG. 35 is a flowchart 3500 illustrating a process for incorporating araw material escape clause into a deal. A sales user first sets aproduct price at step 3510. The sales user must then decide whether ornot to include a raw material escape clause in the deal at step 3515. Ifnot, the method ends. If the clause is to be included, the index priceof the particular raw material of interest should be recorded at step3520. While other indexes may be used in computing the product price,the index or indexes for the particular component or components ofinterest is the critical index or indexes. Normally, the component(s) ofinterest is either highly volatile in price, very expensive, or makes upthe bulk of the product in question.

Once a critical index has been recorded at step 3520, the perioddefining the length of time price protection shall be in effect may beset at step 3525. Preferably, price protection is structured asdiscussed above. Preferably, a threshold value corresponding to apercentage change in the critical index(s) is set at step 3530. Saidcritical index(s) are monitored at step 3535. Any change in the criticalindex(s) of a percentage greater than the threshold value set in step3530 will trigger the raw material escape clause.

The method determines whether any new index price has changedpercentage-wise an amount great enough to trigger the clause at step3540. If the clause is not triggered, the product price remains thesame, but the difference which would have resulted from applying the newindex is captured and displayed as a raw material escape clauseadjustment at step 3550. The current product price is maintainedunchanged for the remainder of the price protection period at step 3555in the same manner as discussed above.

If the change in the critical index(s) is of a magnitude sufficient totrigger the raw material escape clause at step 3540, a new price may becalculated for the product based on the new index at step 3545. In thismanner, the parties are able to modify product prices in the case oflarge swings in raw material costs while maintaining price protection inall other cases.

As can be appreciated, the examples described herein detail tieredpricing, most favored nation clauses and index-based pricing inembodiments of the present invention. Other methods and uses that may beused in combination with tiered pricing, most favored nation clauses andindex-based pricing are contemplated by the present invention.

While this invention has been described in terms of several preferredembodiments, there are alterations, permutations, modifications andvarious substitute equivalents, which fall within the scope of thisinvention. It should also be noted that there are many alternative waysof implementing the methods and systems of the present invention. It istherefore intended that the following appended claims be interpreted asincluding all such alterations, permutations, modifications, and varioussubstitute equivalents as fall within the true spirit and scope of thepresent invention. In addition, the use of subtitles in this applicationis for clarity only and should not be construed as limiting in any way.

What is claimed is: 1-19. (canceled)
 20. In a computerized integratedprice management system, a method for protecting a price of at least oneproduct having a designated index, said method comprising: selecting adeal including said at least one product having a designated index,wherein: said designated index has a published index value, wherein: theprice of said at least one product is computed based on said publishedindex value; and designating a price protection period, wherein: saidprice remains unchanged for the duration of said price protectionperiod.
 21. The method of claim 20 further comprising: computing a newprice for said at least one product at the expiration of said priceprotection period based on said designated index, wherein: a value equalto the published index value at the start of said price protectionperiod is used for said computation; and maintaining said new priceunchanged for the duration of said price protection period.
 22. Themethod of claim 21 further comprising: computing a current price at theexpiration of each price protection period; and maintaining said currentprice unchanged for the duration of each price protection period. 23.The method of claim 22 wherein said at least one product comprises morethan one component.
 24. The method of claim 23 further comprising:designating at least one critical index for at least one of saidcomponents; setting a threshold value for change in said at least onecritical index; and computing a new price of said product irrespectiveof said price protection period when said threshold value is met orexceeded.
 25. The method of claim 24 wherein said critical index is usedto compute said new price. 26-33. (canceled)
 34. A computerizedintegrated price management system configured to protect a price of atleast one product having a designated index, the price management systemconfigured to: select a deal including said at least one product havinga designated index, wherein said designated index has a published indexvalue, and wherein the price of said at least one product is computedbased on said published index value; and designate a price protectionperiod, wherein said price remains unchanged for the duration of saidprice protection period.
 35. The price management system of claim 34further configured to: compute a new price for said at least one productat the expiration of said price protection period based on saiddesignated index, wherein a value equal to the published index value atthe start of said price protection period is used for said computation;and maintain said new price unchanged for the duration of said priceprotection period.
 36. The price management system of claim 35 furtherconfigured to: compute a current price at the expiration of each priceprotection period; and maintain said current price unchanged for theduration of each price protection period.
 37. The price managementsystem of claim 36 wherein said at least one product comprises more thanone component.
 38. The price management system of claim 37 furtherconfigured to: designate at least one critical index for at least one ofsaid components; set a threshold value for change in said at least onecritical index; and compute a new price of said product irrespective ofsaid price protection period when said threshold value is met orexceeded.
 39. The price management system of claim 38 wherein saidcritical index is used to compute said new price.